In a blow to MultiChoice and the SABC, the Competition Commission has ruled that a channel distribution agreement between them, signed in 2013, constitutes a notifiable merger. This means the public broadcaster and Africa's largest pay TV operator are in violation of competition laws by not registering the transaction as a merger.

The five-year agreement worth R500m gave MultiChoice the right to broadcast SABC's 24-hour news channel and an entertainment channel, SABC Encore.

Parliament received information last year that appeared to confirm that as part of the deal, SABC undertook to back MultiChoice's position on the encryption of set-top boxes.

The latest finding by the commission has taken both MultiChoice and the SABC by surprise as it contradicted two previous rulings by the Competition Tribunal and the Competition Appeals Court that the agreement was not a merger. MultiChoice has indicated it would appeal the finding.

What prompted the investigation by the competition authorities was a legal challenge launched by Caxton Publishing, civil society organisation Save our SABC (SOS), and Media Monitoring Africa, in 2015.

Caxton and SOS argued that the agreement was a notifiable merger, and that MultiChoice and SABC have contravened the Competition Act by not notifying the commission.

On Friday, the commission concluded that while the entertainment channel agreement did not constitute a merger, MultiChoice's role in influencing the SABC's policy on the encryption of set-top boxes made this a notifiable merger between the public broadcaster and the Naspers- owned operator.

Commission spokesperson Sipho Ngwema said their decision was based on new facts, which outlined the role MultiChoice played in influencing the SABC's decision on the encryption of set-top boxes.

"The decisions of both the tribunal and CAC were based on the information before them. Subsequently, the Constitutional Court ruled that the commission could and should conduct an investigation into the transaction," he said.

MultiChoice group executive for corporate affairs Joe Heshu said they disagreed with the commission's finding.

"Our view remains that the 2013 agreement between MultiChoice and the SABC was not a merger. We will make further representations before the Competition Tribunal."